According to the Labor Department, jobless claims increased by 55,000 to 286,000 for the third week straight. This is the highest level since mid-October. This was the largest increase in claims since mid-July.
The weekly average of claims for the four weeks, which smooths out weekly volatility and increases by 20,000 to 231,000 rose to its highest level since November. Economists believe that the Labor Department tried to adjust the numbers to account seasonal variations, causing last week's claims to be exaggerated. Applications fell by over 83,000 last week.
Analysts with Contingent Macro advisors said that they could see higher claims for one more week before they reach their peak. "This is something that should be closely monitored going forward.
Contingent stated that the Federal Reserve may reconsider its plans to reduce its massive support of the economy if claims remain above 250,000 at the Fed's March policy meeting.
An increase in COVID-19-related cases has slowed what was a strong recovery from last year's coronavirus recession. The number of jobless claims, which is a proxy for layoffs and has been falling steadily for around a year, dropped below the pre-pandemic level of about 220,000 per week, late last year.
In total, 1.6 Million people received jobless assistance in the week ending Jan. 8.
Employers are holding on to the workers they have, at a time where it is difficult to find new employees. In November, employers posted 10.6 millions job openings. This is the fifth-highest monthly total since 2000. In November, 4.5 million workers quit their jobs -- a record number that shows they are ready to change.
After last year's severe coronavirus recession, the job market has rebounded. COVID-19 was a devastating virus that caused governments to order lockdowns. Consumers stayed home, and many businesses were forced to close or reduce their hours. In March 2020 and April 2020, employers cut millions of jobs and the unemployment rate soared to 14.7%.
However, the economy was reborn after massive government spending and the eventual rollout of vaccines. Although employers created a record number of jobs last year, it was still not enough to replace the 9.4 million jobs that were lost in 2020, Employers struggled to fill open positions, which led to a slowdown in hiring.
However, unemployment fell to 3.9% last month, a low that is considered a pandemic.